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What Explains Developing Country Growth?

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  • Magnus Blomstrom
  • Robert E. Lipsey
  • Mario Zejan

Abstract

Among developing countries, there was no gross relationship between real income per capita in 1960 and subsequent growth in per capita income. However, once other significant influences, such as education, changes in labor force participation rates, inflows of foreign investment, price structures, and fixed investment ratios are taken into account, the lower the 1960 income level, the faster the income growth. This "conditional" convergence was particularly strong among the poorest half of the developing countries, contradicting the idea of a "convergence club" confined to relatively well-off countries. Inflows of direct investment were an important influence on growth rates for higher income developing countries, but not for lower income ones. For the latter group, secondary education, changes in labor force participation rates, and initial distance behind the United States were all major factors.

Suggested Citation

  • Magnus Blomstrom & Robert E. Lipsey & Mario Zejan, 1992. "What Explains Developing Country Growth?," NBER Working Papers 4132, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4132
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    1. Eichengreen, Barry & Uzan, Marc, 1992. "The Marshall Plan: Economic Effects and Implications for Eastern Europe and the Former USSR," CEPR Discussion Papers 638, C.E.P.R. Discussion Papers.
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    4. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    5. Sen, Amartya, 1983. "Development: Which Way Now?," Economic Journal, Royal Economic Society, vol. 93(372), pages 742-762, December.
    6. John F. Helliwell & Alan Chung, 1992. "Convergence and Growth Linkages Between North and South," NBER Working Papers 3948, National Bureau of Economic Research, Inc.
    7. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-1085, December.
    8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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